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American Thomas Doehrman and his Singaporean wife, Lim Ai Wah, have been sentenced to jail in Singapore for a corruption scam involving funds provided by the PNG government, but the couple have other links to PNG, including through two locally registered companies, ITE Ventures Limited and Quest Investments Limited.

Doehrman and his wife Lim are listed by the IPA as the sole owners of Quest Investments Limited and Doehrman is a director of ITE Ventures. Both Michael Somare and Greg Sheppard are also listed as directors of ITE Ventures alongside Doehrman, and Sheppard is also listed as a director of Quest Investments.

According to the Singapore court case, in 2010, Doehrman was one of three trustees of the Inclusive Education for National Development for Community Education (ITE) Trust in PNG. The trust was established by the government of Michael Somare to set up community colleges.

In June 2010, the trust hired the Chinese ZTE Corporation to supply telecom equipment in a contract valued at US$35 million. ZTE then named Questzone Offshore, a shell company set up in the British Virgin Islands by Doehrman and Lim, as a sub contractor. ZTE paid $3.6 million to Questzone in July 2010 based on false invoice for purported services that were never delivered.

The Singapore authorities say from the $3.6 falsely paid to Questzone, Michael Somare received $784,000. According to the Singaporean’s that money was the proceeds of a criminal enterprise. The money was paid to Somare via three cheques deposited into his Singapore Standard Chartered Bank account in August, September, and November 2010.

Lim was a director of the BIV registered Questzone Offshore and Doehrman a director of Quest Petroleum (Singapore).

What has not been exposed in the Singapore court case is Doehrman and Lim’s interests in the two PNG registered companies, Quest Investments and ITE Ventures.

ITE Ventures Limited has a very similar name to the ITE Trust. It has three listed directors, Thomas Doehrman, Michael Somare and Gregory James Sheppard (who is also the company secretary). According to the Investment Promotion Authority, ITE Ventures is wholly owned by the ITE Trust.

Then there is Quest Investment, another PNG registered company. According to the IPA, this company is solely owned by Doehrman and Wah. Like ITE Ventures, Quest has three directors, in this case, Thomas Doehrman, Lim Ai Wah and Gregory James Sheppard.

Neither PNG company has been mentioned in the media in relation to the Singapore case and there is no suggestion at this time that either company has been involved in any criminal activity or other wrongdoing.

Lim Ai Wah and her husband Thomas Doehrman were jailed for laundering US$3.6 million which had been meant to set up community colleges in Papua New Guinea.

Amir Hussain – Straits Times

A married couple laundered US$3.6 million which had been meant to set up community colleges in Papua New Guinea – then gave US$784,000 of it to the country’s then Prime Minister.

Singaporean Lim Ai Wah, 61, was given five years’ jail on Thursday (Sept 1), while her 68-year-old American husband Thomas Doehrman got five years and 10 months.

They were each found guilty on one count of falsification of accounts and five charges of transferring the benefits of criminal conduct.

Doehrman had been the trustee of a fund set up by the PNG government to set up community colleges in the country.

In June 2010 the trust hired ZTE Corporation for US$35 million to supply telecom equipment for the project and the couple conspired with a ZTE employee, Li Weiming, 34, for the company to pay a secret “commission” to them.

To conceal the true nature of the payment, Doehrman and Lim acquired a British Virgin Islands shell company, Questzone Offshore, and signed a fictitious US$3.6 million contract with ZTE.

No services were provided, but a Questzone invoice was created.

Doehrman and Lim gave Li, a Chinese national, US$850,000 via two transactions to his wife’s Hong Kong bank account. They gave Sir Michael three cheques worth a total of USD$784,000 in late 2010, all of which were paid into his Singapore bank account.

The rest of the money was kept in Questzone’s bank account.

The court was not told how the couple were caught, but heard that US$950,000 was meant for the couple and US$1million was supposedly set aside for bribes.

In their police statements, Lim and Doehrman said bribes had to be paid to the then-PM Sir Michael in order to get business from PNG.

Urging District Judge Ng Peng Hong to impose stiff sentences, Deputy Public Prosecutor Alan Loh said the fact that some of the laundered money was traced to then PNG prime minister Sir Michael Somare’s bank account in Singapore will cause public disquiet.

“The sentences imposed on Doehrman and Lim must reflect the seriousness of the present offences which include illicit payments made to a foreign prime minister.

“This is a very significant case in Singapore’s fight against corruption and money laundering”.

He added: “Singapore should not be seen as a haven for slush funds to pass through to the hands of errant or greedy politicians. A strong deterrent message must be sent to safe-guard Singapore’s position as a clean and corrupt free environment for business transactions.”

Li was also charged with one count of falsification of accounts, but he later jumped bail.

The Questzone bank account and Sir Michael’s Singapore bank account with US$301,000 left in it have been frozen.

Lim and Doehrman intend to appeal against their convictions and sentences.

Yesterday we announced our intention to republish over the coming weeks the findings of the National Provident Fund Commission of Inquiry (2000-02) and we presented a summary of the background to the whole NPF saga.

The Inquiry findings provide an unprecedented insight into the methods that are still being used today by the mobocracy that is routinely plundering our government finances.

The inquiry uncovered for the first time how the Waigani mafia organise complex frauds using mate-networks, shelf companies, proxy shareholders, and a willing fraternity of lawyers, accountants, bankers and other expert professionals.

The Commission findings also reveal the one grand truth at the centre of all the corruption in Papua New Guinea: it is pure theft, no different from an ordinary bank robbery. However, if you steal the money by setting up, for instance, a bogus land transaction, the crude nature of the criminal enterprise is disguised to all but forensic experts, making it seem the perfect crime!

Tomorrow we will publish the first installment from the serialization of the Commission of Inquiry Report that first appeared in the Post Courier newspaper from November 2002.

But first, by way of further introduction, below is the speech given by Prime Minister Michael Somare on presenting the Commission Report to Parliament…

NPF – NATIONAL PROVIDENT FUND – TABLING OF THE FINAL REPORT OF THE COMMISSION OF INQUIRY INTO THE NATIONAL PROVIDENT FUND

by RT HON SIR MICHAEL SOMARE GCMG CH, PRIME MINISTER

NATIONAL PARLIAMENT, WEDNESDAY 20 NOVEMBER 2002

Mr Speaker,

I rise to table the findings of the Commission of Inquiry into the National Provident Fund that was established in April 2000, after a special audit report showed that the NPF had suffered enormous losses in excess of K155 million, that it had failed to honour its reporting obligations and that it faced a 50 per cent write down in members funds.

There was also an indication that there had been gross abuses regarding an attempt to sell some property known as the Waigani land to NPF at a grossly excessive price and similar abuses regarding the construction and attempted sale of the NPF Tower (now known as the Deloittes Tower).

The Commission was established with wide terms of reference to examine all NPF’s equity investments, its purchases and management of a company called Crocodile Catering (PNG) Pty Ltd and other investments.

The Commission was asked to examine the conduct of the NPF Trustees and management to see if there were breaches of duty and other abuses and to look specifically at the Waigani land deal and the NPF Tower.

Finally, the Commission was asked to report upon the legislative structure governing the NPF and to make recommendations for structural reform.

The first Chief Commissioner, Sir Charles Maino, resigned early in the piece to contest a by-election and he was replaced with former National and Supreme Court Judge, Mr Tos Barnett. The other Commissioners were Lady Whilhemina Siaguru and Mr Donald Manoa.

The Commissioners, with Mr John Reeve as Senior Counsel assisting the Commission, set about their investigations vigorously calling in documents on 34 major topics to be investigated as well as summonsing hundreds of witnesses to give evidence.

In order to be transparent, the Commission published the Transcript of its daily hearings on the Prime Minster’s website, and gave everyone implicated an opportunity to appear and be heard.

The Commission has found that the losses suffered by the Fund were even worse than has been suspected.

The report, states that by far the main cause of the losses was NPF’s outrageous investment strategy during the 5 years under review by the Commission – 1995 to 1999. Under the chairmanship of Mr David Copland (former managing director of Steamships Trading Company Limited) NPF formulated a policy to borrow massively from the commercial banks to fund its investments in PNG resource stock, mining and exploration companies.

It bought into these investments when prices were high and it borrowed the funds when the interest rate was low. But these were volatile, risky, non-income producing investments and their price was about to tumble as the South East Asian financial crisis of 1997 – 1998 loomed.

The report also states that the NPF also invested more than K40 million of borrowed funds in a doomed attempt to take over Steamships Trading Company and Collins & Leahy Holdings, paying top market price for the stock, which was also about to fall in value.

Then three things happened: –

the share prices fell;

the interest rate on NPF’s borrowed funds rose and

the Kina depreciated against the Australian dollar.

NPF was trapped. As its interest rate burden rose to K1 million per month, it was obliged to transfer more and more share scrip to the banks for security.

Much of this debt was with the ANZ Bank. Just as it was becoming difficult to meet the interest payments and to honour the agreement with ANZ about the value of shares pledged as security, NPF borrowed a further K40 million from PNGBC to construct the NPF Tower.

According to the report, the NPF’s management failed to perform due diligence in relation to the investments and failed to keep the NPF Board of Trustees informed. Frequently management acquired shares without the Board’s authority and also entered agreements without authority.

The Commission has found that NPF’s senior officers – the managing directors, Messrs Robert Kaul and Henry Fabila, the Investment Advisor, Mr Noel Wright and the Corporate Secretary/Legal Adviser, Mr Herman Leahy, were in breach of duty and suggests that in some instances the actions of some of them were criminal.

The Commission has made recommendations that many people be referred to the Ombudsman Commission and some to the Commissioner of Police for further investigations.

Similarly, it has found that the Trustees are in breach of their fiduciary duty to the members for not keeping management in check and for not seeking independent expert advice before investing multi millions of Kina in risky stock.

The commission also found that the NPF management and Trustees ignored and sometimes deliberately violated the Investment Guidelines, which were laid down by Sir Julius Chan in 1993. These were designed to make sure that this superannuation fund (NPF) invested members’ funds carefully and prudentially.

One of the strangest things found by the Commission is that NPF never had the power to borrow money in the first place. The banks failed to make proper inquiries and made these vast loans, which were illegal and probably not recoverable.

When NPF’s cash crisis had brought it to the verge of bankruptcy it was obliged to sell off its assets to repay the debt, which it could no longer service. By that time, however, the share price for NPF’s narrow range of PNG resource stock was very low and when NPF tried to sell down large volumes of those shares, it brought the price down even further so that NPF realised massive losses.

The Commission has reported that while NPF was facing and addressing this crisis in 1999, its newly appointed chairman Mr Jimmy Maladina and the Legal Officer, Mr Herman Leahy (assisted by the late Mr Henry Fabila) set about defrauding the NPF of some K5 million by means of the Waigani land fraud, which the Commissioners say involved the bribery of Lands Ministers Viviso Seravo and Dr Fabian Pok and Lands Board Chairman, Mr Ralph Guise.

The Commission has laid out the evidence against these people in Schedules 5 & 6 and many others in great detail – most of it documented – and has recommended that I should refer them to the Commissioner for Police and to the Ombudsman Commission.

The Commission’s report includes charts, which trace the trail of money from the original fraudulent payments through many transactions and in and out of the books of Carter Newell Lawyers and Port Moresby First National Real Estate, to the ultimate beneficiaries, their families and companies.

Each transaction shown on the charts carries the paragraph number in the Schedule where that transaction is described.

Although the amounts lost to NPF from criminal activities are said to amount to only about K5 million of the approximately K170 million losses, it is still a significant sum which the Commission has found was stolen from NPF by those responsible for managing and safeguarding the members assets.

The Commission has presented tables of all those persons it has recommended that I should refer to the Commissioner for Police or to the Ombudsman Commission, the Law Society and other professional bodies.

I now commend this report to the house and call on the appropriate authorities to take action forthwith

It is 13 years since the National Provident Fund Commission of Inquiry reported its findings on the fraud and mismanagement in our national superannuation provider through the late 1990s.

This means there is now a whole generation of young people who know almost nothing about the corruption that defrauded over 50,000 ordinary people of their savings and which involved many of our current leaders and public figures, including the Prime Minister, Peter O’Neill.

To try and close this important gap in our collective memory and to remind us all of the Commission Findings and the lack of subsequent action against many of those implicated in the corrupt loans and fraudulent building projects, PNGExposed is embarking on a major exercise to republish the Commission findings.

The full report of the Commission of Inquiry has never been publicly released, but over the next few months we will republish the serialization of the Report findings that first appeared in the Post Courier newspaper in 2002.

We begin though with a short summary of the history of the National Provident Fund and the Commission’s main findings (adapted from Wikapedia).

Tomorrow we will publish the Statement made by the Prime Minister Michael Somare when he tabled the Commission of Inquiry Report in Parliament. On Wednesday we will begin the republication of the Post Courier’s serialization of the Commission findings.

History

The National Provident Fund (NPF) of Papua New Guinea was established in 1980.

In the late 1990s there was concern about NPF’s financial liabilities and several allegations of fraud and mis-management.

Between 1996 and 1997, the NPF had increased its debt by approving illegal loans from both domestic and foreign commercial banks as well as engaging in two fraudulent projects; the attempted purchase of the Waigani land and the construction of the NPF tower, which further contributed to its losses.

As a result, in early 2000, NPF fund managers announced a write down of 50 percent in all member contributions made before December 1999, equal to almost K114 million. But a special audit report revealed that the total losses were actually in excess of K155 million.

As a result of these findings the government established a Commission of Inquiry in April 2000 to examine the financial dealings and the allegations of fraud.

The Commission was chaired by former Judge, Tos Barnett, who had previously chaired the inquiry into the logging industry. Barnett was assisted by commissioners Donald Manoa and Lady Wilhemina Siaguru.

The Commission reported its findings in November 2002, but.to date that report has never been made publicly available

The Fund was finally dissolved in 2002 and its assets transferred to NASFUND

Waigani Land Fraud

The Commission of Inquiry found that in 1999 NPF Chairman, Jimmy Maladina had influenced the Fund to purchase a piece of land in Waigani, which he secretly held an interest in, at an exorbitantly inflated price.

Maladina had acquired the lease for the Waigani land in 1997, via his company Waim No.92 Pty Ltd, at a reduced price of PGK1.4 million, instead of the market value of PGK2.87 million. The Commission found that Maladina negotiated this reduction by bribing the chairman of the Lands Board, Ralph Guise, and the Lands Minister, Viviso Seravo.

Following his appointment as Chairman of the NPF in January 1999, Maladina with NPF’s Legal Advisor, Herman Leahy, arranged for NPF to purchase the rights to the Waigani Land, by purchasing a 100 percent shareholding in Waim No.92 for an inflated price of PGK10 million. Maladina had not declared that he held an interest in Waim No.92.

However, when news of the proposed acquisition was published in the national media, the ensuing outcry against the exorbitant price led Prime Minister Bill Skate, to force NPF’s withdrawal from the purchase.

NPF Tower Fraud

The Commission of Inquiry also found that Jimmy Maladina, Herman Leahy and Peter O’Neill had profited by K2.5 million in a fraudulent scheme involving Japanese construction firm, Kumagai Gumi.

Kumagai Gumi was contracted by NPF to build what is now known as the Deloitte Tower in Port Morseby, in 1997. The project was beset by delays and overran its initial schedule, which when coupled with the devaluing of the Kina in 1998 and 1999, reduced the profitability of the project for Kumagai Gumi and led it to register a devaluation claim against NPF.

Maladina agreed with Kumagai general manager, Shuichi Taniguchi, that he would ensure that NPF pay out a K5.8 devaluation settlement provided that K2.5 million of this then be paid to Maladina, by way of commission. The monies were paid as agreed and the PGK2.5 million was shared between Maladina, O’Neill and Leahy.

The Deloitte Tower is now owned by NASFUND.

Charges against Jimmy Maladina and Peter O’Neill

As a result of the Inquiry findings, Maladina was referred to the Commissioner of Police, but fled to Australia to avoid arrest. The government of PNG applied for the extradition of Maladina from Australia, but he returned to PNG voluntarily.

The Commission also referred then Treasurer Peter O’Neill to the Commissioner of Police for his involvement in both the NPF Tower fraud and the Waigani land case. O’Neill was brought before the Waigani Committal Court in 2005 and charged with misappropriation, but the charges were dropped.

The Supreme Court of New South Wales ordered that Woodlawn Capital Pty Ltd (Woodlawn) release AU$20million to Motor Vehicle Insurance Limited (MVIL) as part of the Court’s earlier judgment made in October 2014.

In accordance with the court ruling, Woodlawn transferred AU$20million to Gadens Lawyers Trust Account in PNG in December and today PGK41.9million is finally being released to MVIL. Gadens Law Firm has provided legal representation for MVIL in the matter since proceedings were initiated against Woodlawn in 2011.

This is the latest outcome in the long-running court case between the parties, who are battling over AU$26million held in bank accounts managed by Woodlawn that has been “frozen” by the Court since March 20, 2012.

The case has been pursued by the Independent Public Business Corporation (IPBC) on behalf of MVIL since July 2011 as MVIL is subject to regulation under the Independent Public Business Corporation of Papua New Guinea Act 2002 (PNG).

The matter contended in the Supreme Court of New South Wales goes back to July 2009 when MVIL transferred 96 million kina (about AU$43million) (the Fund) to Woodlawn to invest and manage the Fund with the aim of growing the Fund over time.

This initial transaction is also the subject of a challenge by IPBC in both the National and Supreme Court in Papua New Guinea. As such, neither IPBC nor MVIL are prepared to make further comment on the matter at this stage.

In relation to the matter in Australia, the IPBC Board has unanimously approved legal action against those responsible for losses incurred in the transaction and the establishment of the Fund.

In regard to the Supreme Court of New South Wales ruling there are a number of outstanding issues that the Court will resolve when the matter resumes on March 30, 2015. Those issues include whether MVIL will be awarded interest on the Fund since November 17, 2011 and whether MVIL will be able to recover its legal costs of the proceedings from Woodlawn.

The PNG government should be wary about its new open door policy towards Chinese companies and loans.

Two years ago Chinese state-owned corporation MCC, operator of the controversial Ramu nickel mine in Madang, was exposed as having been labelled corrupt and blacklisted by the World Bank and other international banks.

MCC is clearly not the sort of company you want pumping millions of tons of toxic mine waste into your pristine marine environments. It is a shame Michael Somare did not do a better job of due diligence before jumping into bed with these particular Chinese!

In April we exposed the criminal antecedents of the China Harbour Engineering Company in Bangladesh, Cayman Islands and Jamaica – but in June Powes Parkop gave the company a K300 million contract!

But it appears the rot in China runs much deeper as MCC and CHEC are far from the only Chinese enterprises blacklisted by the World Bank for corruption and other unsavory practices.

The list also includes:

ZHEJIANG ZHEDA INSIGMA GROUP CO. LTD. (INSIGMA GROUP)

ZHEJIANG ZHEDA INSIGMA TECHNOLOGY CO. LTD.

ZHONGKE LIFE SCIENCE & TECHNOLOGY CO., LTD.

HEFEI HIGHWAY & BRIDGE PROJECT CO. LTD

DAQING OILFIELD HIGHWAY & BRIDGE ENGINEERING CO., LTD.

CHINA COMMUNICATIONS CONSTRUCTION COMPANY LIMITED (as the successor or assign to China Road and Bridge Corporation)

CHINA GEO-ENGINEERING CORPORATION

CHINA STATE CONSTRUCTION ENGINEERING CORPORATION

CHINA WUYI CO. LTD

It is not only the World Bank that has bared these companies for fraud and corruption. The companies are also on the blacklists of the Asian Development Bank, European Bank for Reconstruction and Development, and Inter-American Development Bank.

Prime Minister Peter O’Neill claims he is trying to improve the living standards of ordinary people and ensure they have access to basic services, but this is far from the truth.

Confidential government documents show that, just like his predecessor Michael Somare, O’Neill is not only being bullied by the Chinese to give them preferential access to PNG resources – he is using PNG tax payers money to subsidize the Chinese.

The O’Neill government says the controversial Pacific Marine Industrial Zone in Madang province is one of its priorities to boost the national economy but has not revealed:

The USD79 million dollars it is borrowing from the Chinese to fund the project will be plowed straight back into the Chinese company building the PMIZ rather than being invested in PNG companies and people

China Shenyang International Corp has been contracted by the PNG government to design, build and supply equipment and materials for the PMIZ rather than the PNG government using local businesses

The total PNG government contract with China Shenyang International is for USD 95 million, which means PNG taxpayers will be directly subsidizing this Chinese company to the tune of USD16 million.

All the goods, technologies and services purchased for PMIZ will come from China – not PNG suppliers

China Shenyang International will operate completely tax free in PNG, exempt from any “rate, charge, duty or imposition of any kind under PNG laws” – a concession the PNG government NEVER gives to PNG businesses

The PNG government has also granted Chinese officials full and unlimited rights to examine and supervise the project funding including granting a long-term multiple entry visa to the Chinese loan officer.

The government has also “irrevocably waived” any sovereign immunity for PNG in any dispute over the loan, AND agreed while PNG may not assign or transfer any of its rights or obligations China has full rights to assign or transfer any of its rights and obligations!

Finally the PNG government has agreed the loan contract, although signed in PNG and to be effected in PNG will be “governed by and construed in accordance with the laws of China” – bet you don’t even know what those laws are do you Mr O’Neill!